Skin&Skin Loses Again in Second Trial of Compensation Lawsuit Against Optimus Corporation

Kim Jaehyun Group Embezzled 15 Billion Won by Deceiving the Board
Most of the Damages Likely Irreparable

Skin&Skin, a KOSDAQ-listed company, filed a lawsuit against Optimus Asset Management (Optimus) to claim damages related to embezzlement losses amounting to approximately 15 billion KRW, which were siphoned off by former CEO Kim Jae-hyun and his associates. However, the company lost the case in both the first and second trials. In addition to the Optimus corporation, Skin&Skin has filed separate lawsuits against other participants involved in the embezzlement. Summarizing these cases, the total amount of compensation recognized by the courts so far is about 2 billion KRW.

According to legal sources on the 30th, the Seoul High Court Civil Division 18-3 recently ruled against Skin&Skin in its damages claim lawsuit against Optimus, just as in the first trial.

Previously, shortly after the COVID-19 outbreak in June 2020, Kim Jae-hyun and his associates deceived the Skin&Skin board of directors into believing that 15 billion KRW in cash held by Skin&Skin would be used for mask distribution business, and embezzled the funds. This was possible because Kim Jae-hyun was the largest shareholder of both Skin&Skin and the mask wholesale and retail companies at the time. The embezzled money was used to prevent the suspension of redemptions of Optimus funds. The Optimus scandal involved Kim Jae-hyun and his associates collecting investments under the pretense of stable fund management, but actually using the funds for purchasing private bonds and rolling over funds, which eventually caused a large-scale suspension of redemptions.

Subsequently, Skin&Skin demanded 18 billion KRW in damages from Optimus, the employer of Kim Jae-hyun, for the embezzled funds and delayed damages. Skin&Skin also requested the Korea Deposit Insurance Corporation, the bankruptcy trustee of Optimus, which had been declared bankrupt, to confirm the claim amount as a bankruptcy claim. On the other hand, Optimus argued that it was solely the illegal act of Kim Jae-hyun personally.

The first trial ruled that “Skin&Skin cannot claim compensation from Optimus.” The court reasoned that if Skin&Skin had exercised even minimal caution, it would have realized that the mask payment transactions were not related to Optimus’s business execution but were illegal acts by Kim Jae-hyun and others. The appellate court upheld this judgment as correct.

However, Skin&Skin won partial compensation in two other damages lawsuits filed against the participants involved in the case. First, Skin&Skin won the first trial in a 1 billion KRW damages claim lawsuit against Kim Jae-hyun, Optimus’s second-largest shareholder, and Optimus directors. The fact that Kim Jae-hyun was sentenced to 40 years in prison in a related criminal trial was a key basis for this decision. Since Kim Jae-hyun and others did not appeal, this ruling was finalized at the first trial.

Skin&Skin also won the first trial in a 1 billion KRW damages claim lawsuit against seven former board members, including the Skin&Skin CEO at the time of the embezzlement incident. Skin&Skin claimed that “the board members at the time approved the 15 billion KRW payment agenda without proper review of Kim Jae-hyun and his associates’ fraudulent acts,” and the first trial court pointed out that “the board members passed the resolution without substantial review, and company funds were misappropriated as fund redemption payments according to Kim Jae-hyun and his associates’ intentions.” Some board members have appealed the first trial ruling, and the appellate trial is ongoing.

If Skin&Skin accepts the second trial loss against Optimus, the total amount recoverable through the three lawsuits will be limited to a “maximum of 2 billion KRW,” which is far below the actual damage amount. The 15 billion KRW loss corresponded to most of the cash assets Skin&Skin held just before the incident.